On August 28, the Trump Administration reaffirmed its more management-friendly regulatory stance with the issuance of six new opinion letters by the Wage and Hour Division of the U.S. Department of Labor. Four of the letters concern the Fair Labor Standards Act, and two concern the Family and Medical Leave Act. None of the FLSA opinion letters find a violation of the law based on the facts and circumstances described by the employers. One of the FMLA opinion letters finds no violation, but the other disagrees with the employer’s proposed interpretation of the FMLA.
All six opinion letters were signed by Bryan Jarrett, the Acting Administrator of the Wage and Hour Division.
Non-compensable “off duty” time for wellness-related activities
In one opinion letter, the DOL addressed whether the FLSA requires compensation for time spent by employees voluntarily participating in certain wellness activities, biometric screenings, and benefits fairs. The employer allowed its employees to voluntarily participate in biometric screenings and benefits fairs during and outside of regular work hours, but it did not pay them for the time spent attending these events. The screening tested an employee’s cholesterol levels, blood pressure, and nicotine use (among other things). Employees who participated were eligible for reduced health insurance premiums. The screenings were in no way related to the employees’ job functions or duties. The employer also gave its employees the opportunity to attend benefits fairs to learn about topics such as financial planning, employer-provided benefits, and college attendance opportunities. The benefits fairs were open to all employees and unrelated to the employees’ job duties, and attendance was also voluntary. According to the DOL, the employer had represented that it “received no direct financial benefit as a result of employee participation in any of the above-described activities.”
In concluding that the time spent participating in these activities was non-compensable, the DOL noted that the crux of “employment” and “work” under the FLSA depends on whether the time is spent “predominantly for the employer’s benefit or for the employee’s.” An employee is considered to be “off duty” during periods when he or she “is completely relieved from duty and which [is] long enough to enable him [or her] to use the time effectively for his [or her] own purposes.”
The DOL concluded that the biometric screening and benefits fairs were (1) predominantly for the benefit of the employees, (2) unrelated to any job-related duties, and (3) completely optional. The DOL also found that the time off was sufficient to be used by employees for their own purposes. Accordingly, employees’ time spent at these activities is not “work” under the FLSA and was “off duty” time.
The opinion letter did not address what indirect benefit, if any, the employer may have derived from the employees’ participation in biometric screenings or benefits fairs, or whether the reduction in health insurance premiums made the activity less “voluntary” on the part of the employees.
Retail or service establishment exemption
The second wage and hour opinion letter concerns a frequently-litigated exemption from the Act’s overtime pay provisions. Section 207(i) of the FLSA exempts employees of “retail or service” establishments from the requirement to pay overtime, provided that (1) the employee’s regular rate of pay exceeds one and one-half times the applicable minimum wage in the workweek in which he or she works the overtime, and (2) more than half of the employee’s earnings in a representative period consist of commissions.
The opinion letter analyzed one of the key threshold issues under the exemption: what is a “retail or service” establishment within the meaning of the Act and applicable regulations? The DOL noted that, under the Supreme Court’s recent opinion in Encino Motorcars, LLC v. Navarro, FLSA exemptions deserve a “fair,” rather than “narrow,” interpretation, as the exemptions are “as much a part of the FLSA’s purpose as the overtime-pay requirement.” Thus, the Administration has made it clear that it will use this language to guide a generous application of the Act’s minimum wage and overtime exemptions.
The employer described its business as sales of “a technology platform that enables online and retail merchants to accept credit card payments from their customers from a mobile device, online, or in-person.” To sell its technology platform, the company employed inside sales representatives. The platform could not be resold, as it was customized to each merchant-customer, and 100 percent of the company’s sales were of the technology platform.
A retail or service establishment (1) engages in the making of sales of goods or services; (2) has 75 percent of its sales of goods or services, or of both, recognized as retail in the particular industry; and (3) makes 25 percent or less of its sales for resale. The DOL said that the employer satisfied the first requirement “in part because [it] sells its platform to a variety of purchasers, the platform serves their everyday needs, the platform is not distributed further once sold, and [it] does not sell large quantities of the platform to any single customer.” The DOL further noted that it did not matter whether the company’s customers were predominantly commercial entities or whether the business operated over the internet. As for the second and third prongs of the enterprise test, the DOL found that the company did not engage in wholesaling, and that the technology platform could not be resold.
Nonprofit unpaid volunteer “graders”
The third opinion letter concerns the applicability of the FLSA to putative volunteers at a nonprofit professional credentialing organization. The nonprofit organization administers examinations necessary for professional designation in the profession it regulates. To grade the exams, the nonprofit group selected approximately 650 credential-holders (who are also members of the organization) to serve as graders for one-to-two week periods. Historically, the organization provided graders with a flat fee for their services and reimbursed them for their transportation, accommodations, and meals during the grading period. The organization planned to discontinue the flat fee but to continue the reimbursements.
According to a survey of the graders conducted by the organization, the graders volunteered their time out of a desire to “give back” to the profession, and for the honor of being selected.
In concluding that the graders were properly classified as volunteers (and therefore not subject to the minimum wage and overtime provisions of the FLSA), the DOL noted,
Graders are typically highly compensated executives who continue to receive their regular salaries from their primary employers. They travel from their home locations to serve as Graders, and do so only once per year for no more than two weeks. These and other factors outlined above indicate that Graders offer their services freely and without pressure or coercion.
Section 10b03 of the DOL’s Field Operations Handbook contains a discussion of factors relevant to volunteer status under the FLSA. The factors include whether the work is full- or part-time, whether the workers contemplate pay for their services, and whether the work is typically associated with volunteerism (such as folding bandages for the Red Cross, helping in a school library, or driving a bus for a school sports or band trip).
Motion picture theater exemption for food service workers at theater
The final FLSA opinion letter discusses the overtime exemption for “any employee employed by an establishment which is a motion picture theater.” The employer owned motion picture theaters that provided in-theater dining, and some locations had full-service restaurants on site. The food service operations were not separately incorporated and did not operate as separate entities. In addition, the company’s primary revenue source was the sale of movie tickets. Each of the employer’s locations used a single kitchen to prepare food for both the in-theater and full-service dining, and the same employees were cross-trained to work at positions in both the theaters and the restaurants.
To determine whether all of the motion picture theater’s employees were subject to the exemption, the DOL first analyzed whether the restaurant operations were a separate establishment from the movie theaters. The motion picture theater exemption would not apply if the restaurant workers were considered part of a separate establishment. The DOL noted that “two or more ‘portions of a business [ ] located on the same premises may constitute more than one establishment for purposes of exemptions,’” provided that they are “physically separated,” are “functionally operated as [ ] separate unit[s] having separate records, and separate bookkeeping,” and have “no interchange of employees between the units.” Otherwise, though, the units will be treated as a single establishment.
A “motion picture theater” is defined as a commercially operated theater “primarily engaged in the exhibition of motion pictures.” According to the Field Operations Handbook, an entity “primarily engaged” in the exhibition of motion pictures devotes “at least 50 percent” of its available time to presenting motion pictures.
Applying these principles, the DOL found that the employer’s theater and food service operations were a single “establishment” because they (1) were “functionally integrated,” (2) were incorporated as a single unit, (3) filed taxes and maintained business records as a single unit, (4) provided services to the public under a single business name, and (5) commingled employees. Because the theaters showed motion pictures consistently throughout their hours of operation, the DOL found that the exemption applied.
As noted above, the DOL also issued two opinion letters concerning the Family and Medical Leave Act.
Roll-off of attendance points during FMLA leave
In its first FMLA opinion letter, the DOL considered whether an employer’s absenteeism policy unlawfully discriminated against employees who took FMLA leave. The employer had a no-fault attendance policy under which employees received “points” for absences, with exceptions for FMLA leave, workers’ compensation, and vacation. Accumulation of 18 points during a 12-month period resulted in discharge. Attendance points rolled off the employee’s record after 12 months of “active service.” During periods of leave – including FMLA leave – the “roll-off” was frozen. Thus, an employee on FMLA leave might carry attendance points for more than a 12-month period.
Generally, FMLA-related absences cannot be counted under no-fault attendance policies. Moreover, an employee on FMLA leave normally cannot lose benefits that he or she had already accrued before the leave began. On the other hand, an employee on FMLA leave is not necessarily entitled to continue to accrue benefits during the period of leave. In the scenario presented by this employer, the frozen “roll-off” period did not cause employees to lose any benefit that had accrued before the employees took FMLA leave. Accordingly, the DOL found that the attendance policy did not violate the FMLA. (However, the DOL did note that “if the employer counts equivalent types of leave as ‘active service’ under the no-fault attendance policy—meaning that the employer counts such leave toward the twelve months necessary to remove points—then the employer may be unlawfully discriminating against employees who take FMLA leave.”)
Organ donation as a “serious health condition”
In its second FMLA opinion letter, the DOL said that an organ donor who required an overnight hospital stay was entitled to use FMLA “serious health condition” leave. The DOL noted that the FMLA defines “serious health condition” as an “illness, injury, impairment, or physical or mental condition that involves” either “inpatient care in a hospital, hospice, or residential medical care facility” or “continuing treatment by a health care provider.” Thus, organ donation qualifies as a serious health condition when it involves an overnight stay in a hospital, as is often the case, or meets the requirements for “continuing treatment by a health care provider.”
Background on wage and hour opinion letters, Trump nominee for Wage Hour
On March 24, 2010, the Wage and Hour Division of President Obama’s Department of Labor announced that it would suspend the longstanding practice of issuing opinion letters, in which the DOL responds to employers’ specific requests for guidance concerning their employment policies and practices. Instead, the Obama DOL published “Administrator Interpretations” addressing the state of the law “as it relates to an entire industry, a category of employees, or to all employees.” This shift was part of the Obama Administration’s emphasis on increased enforcement of the wage and hour laws. In March 2009, before the announced policy change, the DOL had rescinded 17 opinion letters released at the end of the Bush Administration concerning a wide variety of issues, including FLSA overtime exemptions, the compensability of certain on-call time, computation of the regular rate of pay and overtime, and wage deductions.
On January 5, 2018, the Trump Administration reinstated the 17 formerly-withdrawn opinion letters. Secretary of Labor Alex Acosta continued the rollback of Obama-era policy by withdrawing a 2015 Administrative Interpretation concerning the determination of workers’ independent contractor status. On July 13, 2018, the DOL issued Field Assistance Bulletin 2018-4, which telegraphed the Trump Administration’s more pro-employer views on wage and hour issues.
President Trump has nominated Cheryl Stanton, currently Executive Director of the South Carolina Department of Employment and Workforce, to become Administrator of the U.S. DOL’s Wage and Hour Division, and her nomination was approved in October 2017 by the Senate Committee on Health, Education, Labor, and Pensions. However, Ms. Stanton has yet to be confirmed. Given the political jockeying likely to occur in Washington before the upcoming midterm congressional elections, it is possible that the Administrator post will remain vacant into 2019.